Definition of Commodity spread/straddles

The commodity-product spread is the difference between the price of a raw material commodity and price of a finished product created from that commodity. A common commodity-product spread is the "crack spread".

Trading on the fluctuations in the commodity-product spread is a sought-after trade in the futures Futures market. This can be very advantageous for firms that transform raw materials to goods and products. These firms can purchase futures and sell product futures, edging risk and aiding to circumference in the gross profits.

Points to remember:

• Commodity spread trading is derived from hedging strategies.
• It is used lessen the risk involved in trading.
• Price for the commodity is secured with the assistance of futures.